FII fund outflow continues

of the Indian markets after the fall of the Gujral government and announcement of fresh elections. FIIs wouldn’t invest at a time when the country was facing uncertainties on the political front,” said an FII analyst.

Now with the entire Asian market in turmoil, market sources don’t expect any significant allocation for Asian stock markets from US and European funds in the current year. South-east Asian markets had fallen bynearly 5-20 per cent in the last one month. Further, Moody’s critical evaluation of the Indian economy, irrespective of the various reforms and progress on the fiscal deficit and debt servicing front further ruined the perception of the fund managers, who are cautious after the South-east Asian market crisis.

Adding to the worries, currencies in Asia were also depreciating steeply.

The Indian currency has been falling continuously – now stands at Rs 39.73 against the dollar – despite various measures taken by the Reserve Bank of India (RBI). “When the currency turns volatile, FIIs will keep away. Many of them are now losing heavily in Indonesia where rupiah lost nearly half of its value against the dollar,” FII sources said.

“If Moody’s actually downgrades India, it would trigger a sharp correction,” said a BSE broker. The exit of FIIs from India has affected stock markets. Sensex has been floundering in the range of 3300-3500 for the last three months.

According to SEBI, in December, FIIs made purchases worth Rs 934.7 crore but there were sales worth Rs 1513 crore, showing a net outflow of $ 155.4 million (Rs 578.6 crore). In January (upto 8th), sales amounted to Rs 118.8 crore while purchases were only Rs 101.3 crore, showing an outflow of Rs 17.5 crore ($4.7 million).